Chapter XI: The Trust in Germany, Sweden, and France

In Germany the Standard was artful enough to strengthen its position by acquiring existing oil companies and retaining certain prominent German oil merchants as shareholders, thus breaking to some extent the force of the natural outcry against itself as an alien corporation. In the case of its English companies, very few shares are held by anybody resident in England, and even these are mostly Americans, but in Germany they are more cautious. There has been a great controversy as to the adoption of tank railway wagons and tank installations on the Prussian State railways. It is obvious that these methods will cheapen the transit of oil, but it is also obvious that they will play into the hands of the Standard, which with its vast capital is able to establish extensive installations of this kind, and to prevent its smaller competitors from reaching the market.

Public opinion is the more suspicious of these gentlemen because of the remarkable revelations made last year with reference to their branch--not included in the list given in Chapter I.--which is called the German Vacuum Oil Company. The disclosure in question is so thoroughly in keeping with what is already known of the doings of the Standard in other parts of the world that it fully bears out the opinion already expressed, that the great octopus is always one and the same in its methods irrespective of time and country. It goes all the lengths it is permitted to go. It has gone, as will be seen, pretty far in Germany, though the State railway system renders rebates impossible there, and as Germany is so close to our own doors the lesson is one we may well take home to ourselves.

In the early autumn of 1909 Mr. F. Hildebrandt, the editor of the _Hamburger Fremdenblatt_, whose attention had been called to the doings of the German Vacuum Oil Company, and who had been led to investigate the matter, published a vigorous attack on that Company in his columns. We of course know that the Vacuum Oil Company, Ltd., is in England merely a tentacle fixed on the body of John Bull through which suction is applied from 26, Broadway, New York. But the Hamburg Chamber of Commerce were in blissful ignorance until quite recently that the German Vacuum Oil Company was only the particular limb of the monster that had settled down on Germany. It reported not so long ago to the Friedrichsort Torpedo Works at Kiel that the Vacuum was a German company, though it might have learnt differently if it had taken the trouble to look into the Handelregister, or German public registry of commercial companies. There it would have found among the names of the chief shareholders Messrs. J. D. Archbold, C. M. Pratt, and C. M. Everest, the well-known Standard men who were registered as the original directors of the Vacuum Oil Company of Rochester, N.Y, the Company whose connection with the Buffalo arson prosecution has been explained in Chapter VI. Their connection with the Vacuum Oil Company, Ltd., of London will be explained in a later chapter. Two other shareholders of the German Vacuum Oil Company, J. C. Moffet and C. E. Bedford, also belong to the Standard.

The main allegation put forward in the _Fremdenblatt_ by Mr. Hildebrandt was that the German Vacuum Oil Company was selling precisely the same quality of lubricating oil under various fancy names and at different prices, according to differently imagined utilities to its German customers, and securing preference being given to its goods by bribing engineers and foremen right and left to advise their employers in their favour. The simple change of a label seemed to have such a marvellous effect on the intrinsic quality of the Vacuum lubricator that in some cases it justified a rise of 25 per cent. in price, and even higher. The “Etna” brand of lubricating oil, for instance, was a poor thing that sold at 41 marks per 100 kilos for ordinary smearings, but when an important firm gave an order for a superior article such as the “Gas Engine E” or “Viscolite” oil they received the same old “Etna” oil duly labelled “Gas Engine E” or “Viscolite” at the correspondingly superior price of 56 marks and 62 marks respectively. Acting on this denunciation, the Public Prosecutor intervened, ordered an inquiry, and summoned Mr. Hildebrandt to produce his evidence, but not before Dr. Oscar Ruperti, a director of the Vacuum in Hamburg, had taken a personal action for libel against Mr. Hildebrandt, who in his turn had taken an action against Mr. E. L. Quarles, the American manager of the Vacuum in Hamburg, and Dr. Pölchau, who was both legal counsel and brother-in-law to Dr. Ruperti. These personal actions appear to be still pending, but the action instituted by the Public Prosecutor was carried as far as a judgment, of which the following is a translation:--

Record Number: F. IV., 360/10.

JUDGMENT.

On the motion of the Public Prosecutor, the accused, Edward Louis
Quarles, is discharged with reference to the accusation of fraudulent
practice, on the ground of insufficient proof. The costs of the
action are charged to the State.

GROUNDS.

The preliminary inquiry was opened against the accused on his
appearing suspect at Hamburg and elsewhere--

1. Of having in the years 1906–08, in conspiracy with the merchant
E. O. Wader, now absent, defrauded the State Electrical Works at
Kiel of 2,826 marks 5 pfennigs by delivering to the works, instead
of the brand “Vacuoline,” which was ordered, at the price of 75
marks per 100 kilos, the description “Fusoline,” which only cost 44
marks per 100 kilos, under the brand of “Vacuoline.”

2. Of having, since the year 1905, defrauded numerous customers
of the German Vacuum Oil Company by representing in the Company’s
price-list that the descriptions of oil “Gas Engine E and F” and
“Gas Engine I and Heavy” are a more valuable article than the
descriptions “Etna” and “Fusoline,” quoted in the price-list at
44 marks per 100 kilos, whereas the two latter descriptions are
identical with the two former respectively.

As to the charge of fraudulent conspiracy to the detriment of the
Kiel Electrical Works, it has not been proved that the accused
Quarles bears the responsibility of changing the cheaper brand
“Fusoline” into the dearer brand “Vacuoline.” The order to effect
this change in the branding was given at a time when the accused
Quarles had not as yet a seat upon the board of the German Vacuum
Oil Company, and had nothing to do with the Hamburg branch. At the
end of 1906 or the beginning of 1907 the accused had, of course,
learnt of the changes being made in the brandings from the then
manager of the Hamburg branch, Earnshaw. But at that time also the
accused had nothing to do with the Hamburg branch office, and was not
called upon to prevent what was in his view an incorrect rebranding.
Also, he had nothing to do himself with the changing of the brand.
It has not been proved that after the accused had taken a seat upon
the board of the German Vacuum Oil Company that the rebranding of
“Fusoline” as “Vacuoline” was still carried out with the knowledge
and consent of the accused.

As to the rebranding of the cheaper descriptions of oil “Etna” and
“Fusoline” as “Gas Engine E and F” and “Gas Engine I and Heavy”
respectively, the preliminary inquiry has tended to show that “Gas
Engine I and Heavy” consist of different components to the other
brands, and are consequently not identical with them.

The brands “Etna” and “Gas Engine E” are, of course, identical,
as is “Fusoline” and “Gas Engine F.” But a fraudulent method of
trading could only be found to exist in the different branding if
it were established that these like descriptions were delivered
under different brandings and different prices to one and the same
customer. It has not been possible to establish that. The accused
also cannot rebut the allegation that he gave it as his opinion that
the differentiation in prices was justified by the different way in
which the two oils were used, the higher running expenses for “Gas
Engine E and F,” and greater risk encountered by the users of these
two brands.

Hamburg, May 30, 1910.

The Landgericht, Second Criminal Chamber,
(_Signed_) GOSLICH, LOHMEYER, SICK.

For the correctness of the copy:

Hamburg, July 9, 1910.

The Chancery of Public Prosecution,
(_Signed_) Voss, Chancery Clerk.

It will be seen at once that the judgment exculpates Mr. Quarles personally, but obviously inculpates the German Vacuum Oil Company, by assuming that the practices alleged had taken place, though there was not evidence to connect Mr. Quarles with them.

Mr. Hildebrandt makes great capital, in a pamphlet he has published, out of the regular Standard Oil practice of bribery, with which the German public seems to have been quite unfamiliar, but in which their education must now have been pretty well completed, to judge from the mass of evidence adduced in the Hildebrandt book. Some of it is entertaining enough and edifying enough for British consumption, particularly as it relates to a cousin-German of one of our own Standard Oil subsidiaries. Here is the text of an affidavit made by Mr. Hans Schnell, who had formerly been a representative of the German Vacuum Oil Company:--

I, the undersigned, hereby declare and am ready to testify on oath
that from September 15, 1906, to March 31, 1908, I was in the employ
of the German Vacuum Oil Company of Hamburg, as representative for
the Dresden branch, and later for Lower Silesia, on a fixed salary of
200 marks a month and also confidential expenditure and commission.
This commission I had for the most part to pay over to machine-men,
partly in cash, partly in goods, in order to bring off new business,
and in some cases to maintain business relations heretofore
existing. I was told by Mr. Naerger, the correspondent for Breslau,
in the branch office in that city of the German Vacuum Oil Company
of Hamburg, the names of the firms whose machine-men were to receive
bribes from me. Also Mr. A. S. Mié, of Dresden, director of the
Vacuum Oil Company, told me in a way that could not be misunderstood
that I was to expend these commissions in this way, and that if I had
paid over no bribes in money or goods to the machine-men of the firms
I had to call on I would have had scarcely any new orders, and would
have lost the old business connection.

Dresden, November 4, 1909.

(_Signed_) HANS SCHNELL.

The above signature of Mr. Hans Schnell, Wilhelmruh, near Berlin,
merchant, was done in my presence, and I hereby officially certify
that it is genuine.

Dresden, November 5, 1909.

(_Signed_) HORST VON MUELLER-BERNECK,
Royal Saxon Notary, Dresden.

In further illustration of Mr. Mié’s efforts, Herr F. Hildebrandt publishes a photographed bill of expenses incurred by that gentleman in establishing and keeping up the German Vacuum Oil Company’s business connections, and no doubt incidentally of establishing a reputation for himself among engineers and machine-men generally of being a thoroughly jolly fellow. This document will, perhaps, help us to understand why so many working engineers select the Vacuum oils, when no chemical test known to science will indicate any superiority. Its translation is as follows:--

M.
Evening with Mr. Pampel and Obersteiger Hohner 42
Evening with Mr. Mié 28
[NOTE.--We had invited these gentlemen, and threw
about a good deal of money in order to
accomplish something. Besides the M. 28
entered here I added M. 48 out of my own
pocket, which I have had entered in my
own account.--(_Signed_) MIÉ.]
Cash, Mr. Müller, foreman 100
Cash, Mr. Plaintz, engineer, of Gustav Toelle 50
Foreman of S. Wolle 5
Cigars for foreman Müller 12.50
Cigars for foreman Hortenbach 6.25
Carriage and beer--call on Hortenbach 10.30
Wine, dinner, cigars, &c., with Hortenbach 35.20
Cash, Mr. Hortenbach 20.00
------
Total M. 309.25

Mr. Hortenbach seems to have taken a good deal of lubricating. Apparently his machinery remained immovable under the influence of wine, dinner, and cigars, and it became necessary to put twenty marks in the slot in order to make him work.

How Mr. Hildebrandt got hold of this bill, or petty-cash ticket, he does not say, but he evidently takes a sinister view of the junketing disclosed, and regards the money spent upon it as so much “Schmiergeld,” to use the appropriate word employed by Mr. Schnell in his affidavit. The only English translation for “Schmiergeld” is “bribe”--no doubt a very frigid and colourless word. “Smearing-money” would be more descriptive and picturesque as well as literal, though for absolute neatness of expression joined to pregnancy of meaning the Italian circumlocution for the ugly word “bribe” of “oglio di palma,” or palm-oil, beats the German. “Lubricating oil” seems an apt English equivalent.

* * * * *

Mr. Hildebrandt also publishes a letter on this subject from one of the Vacuum Oil Company representatives, which seems to have attracted some attention in Kiel:--

KIEL, _November 12, 1903_.

The German Vacuum Oil Company, Hamburg.

I beg to acknowledge receipt of yours of the 10th of this month, the
contents of which I note. With reference to my expenditure as your
representative, I gave the Flensburg Shipbuilding Company last month
alone some 190 marks for gratuities and introductions to the three
foremen. Then I gave 50 marks to the head man at the Kiel Electrical
Works. As to the smaller expenses incurred as your representative, I
cannot remember them now, but they will be found in my memoranda of
extra expenses.

Yours truly,
HUGO COHR.

The Vacuum Oil people have always liked to be on good terms with the engineer, the actual mechanic who has to see to the application of the lubricating oils to the machinery, and whose opinion on their merits is naturally deferred to by his employers. Mr. Heinrich Gremmler, a director of the German Vacuum Oil Company, and manager of the Berlin branch, wrote, under date June 20, 1908, by way of instruction to one of his agents, in one of the letters photographed by Mr. Hildebrandt: “Try and get at what you want through the foremen--that is, by indirect means. There is no need at all for me to tell you on what spot you may put your hand upon success.” Mr. Hildebrandt took all this up in a very unkind spirit towards the German Vacuum Oil Company, and spoke of it as bribery, whereupon Mr. Gremmler called upon him, he says, and denied indignantly that the Company practised bribery. In fact, the Company published a document in its defence against this charge signed by Dr. Ruperti, one of its directors, in which, while it did not go so far as to state that it never practised bribery, it declared, at any rate, that “it was incorrect to say that the German Vacuum Oil Company had introduced the gross practice of bribery into German trade as a system, and that it had succeeded by means of bribes in obtaining permanently higher prices for its oils.” The studious moderation of this defence strikes me as remarkable. The Company, however, also took occasion to state that it never put any employee into its selling business except on a contract containing this passage:--

You pledge yourself in dealing with the employees of our customers
most carefully to abstain from any transaction that has even the
appearance of corrupt influence. Any action contrary to this
regulation is a special reason for instant dismissal.

But Mr. Hildebrandt unkindly suggests that this is only another way of saying “Don’t nail his ears to the pump.” He also says that after the publication of the Hugo Cohr letter in Kiel, the Vacuum Oil Company was struck from the list of those invited to tender for the supply of oils to the municipality. The British public and the proprietors of British engineering works must form their own judgment in the matter, but they will at any rate see that, for one reason or another, the Vacuum Oil people have conceived a deep affection for the German working man.

These revelations are the more interesting because there are similar stories from other countries where the Vacuum methods have been introduced. The _Morgenblad_, of Stockholm (quoted in the English shipping organ _Fairplay_ of July 22, 1909), gives an account of the methods of the Vacuum Oil Company, of Sweden, another of the Everest group. The Stockholm newspaper states that the Civil Commission appointed to inquire into the buying of naval stores has in its possession several letters from the Vacuum Oil Company of Sweden to engineers in the Swedish Navy. These letters contain advice to enable the engineers to prove to their superior officers, who possess less knowledge of the subject, that other lubricating oils are inferior to those vended by the Vacuum Company. One letter runs: “It is very easy to do this by only tightening the nuts a little, and the bearings will soon become hot.”

The sensation created by the publication of these letters caused the Chancery of Justice, the highest judicial authority in Sweden, to order the Chief of the Criminal Police in Stockholm (Mr. Lars Stendahl), who is also an officer of the Municipal Treasury, to hold a general inquiry with plenipotentiary authority as to the summoning of witnesses. This was on May 18, 1909, and on June 5th following the King of Sweden confirmed this Commission, and added two other Commissioners, Messrs. J. Th. Akerström and Fr. S. Eriksson. In the beginning of September, 1909, Mr. Stendahl’s report was issued, which proves by an abundance of sensational and at times amusing evidence that the so-called Swedish Vacuum Oil Company is identical with that of Rochester, U.S.A., that it has evaded Swedish taxation, fraudulently rebranded cheaper as dearer oils, and by a very curiously concealed system of bribery induced engineers of the Royal Navy to diminish the effectiveness of their service.

In the result the Company lost all its Government contracts, but escaped further proceedings, as Swedish commercial law in its previous innocence of the “real smart” methods now introduced to backward old Europe by the Standard Oil apostles, had utterly failed to provide penalties to meet the case. From Norway, in September, came the news that the last independent refinery had been acquired by the Standard, that much public indignation had been aroused among the hardy Norsemen, and that steps were being taken with the support of the Government to build at once an independent refinery.

In France, where there is a heavy duty on refined petroleum, the Standard has established a refinery, which has given it a monopoly of the benzine trade. The latest news last September was that the French Government has been induced to reduce the import duty on Dutch East Indian benzine from £1 to 10s., and this has enabled the Royal Dutch combine to start a refinery in France for the purpose of competing with the Standard. As I have explained, the Sumatran and Borneo crude provides a higher percentage of benzine than the Standard’s American crude, and there is no doubt this move will prove a very awkward one for the latter.

THE TRUST’S “TIED HOUSES” IN ENGLAND

“According as you put something into the Church or the Sunday-school
work the greater will be your dividends of salvation.”

JOHN D. ROCKEFELLER _in a Sunday-school address_.